Credit Utilization

• Maxing out your credit cards affects your credit utilization, which in turn will affect your credit score. The amounts you owe, both the dollar amounts and the amounts in relationship to your credit limits, account for 30 percent of your credit score. Your credit utilization on each card is the most recent statement balance divided by the current credit limit on the card. Maxing out a card means you have used all your available credit, giving you a credit utilization of 100 percent. A high credit utilization hurts your credit score. MSN Money recommends keeping your utilization on each card below 30 percent, and ideally getting it down to just 10 percent.
  
  

Potential Impact

• The number of points your credit score will drop depends on how many cards you have maxed out and the other items in your credit report. The better your credit score before you max out the cards, the greater the negative impact. The MyFICO website estimates that someone who had a credit score of 780 would lose 25 to 45 points for a maxed out card, whereas someone who began with a score of 680 would only lose 10 to 30 points.
  
  

Payment History

• Paying your credit card bill on time, even if it is just the minimum payment, will help your credit rating. This is because 35 percent of your credit score is based on your payment history. The amount of the payment does not matter, as long as it is at least the minimum payment required by the lender. However, if you make a habit of maxing out your credit cards, this indicates a deeper problem of poor cash flow management, which could eventually cause you to miss payments because you cannot afford them. Missing payments will damage your credit rating.
  
  

Tips

• If your credit cards are maxed out, you have not done any irreparable damage. Unlike a missed payment, which stays on your credit report for seven years, your credit utilization only considers your current balances. Therefore, if you pay down your balance before you next apply for credit, the maxed out credit score will not have done any irreparable damage to your score. It only hurts your score during the time when the credit card balance is high in comparison with your credit limit.